Cuba's Travel & Tourism Industry

The global travel market based on gross bookings (total value of the travel booked) was a US$1.4 trillion market in 2014. A total of 41% of this amount (US$575 billion) was the online travel market. The online travel industry in general is dominated by industry giants such as Priceline and Expedia who collectively own a majority of the brand travel and tourism websites. However, the market has shown that there is significant interest in niche travel companies that provide local tour and marketing support for travelers to explore local cultures and locations. A greater emphasis is also on “adventure tourism” including staying outside of major tourist resorts such as private residences and B&B locations. Smaller niche startups have successfully launched with geographic-specific travel support such as Jumai providing hotel and travel services in Nigeria, or with service specific sites such as CouchSurfer.com providing hosteling and home sharing services to travelers.Success of companies such as Airbnb and HomeAway (home rentals) as well as Uber and GrabTaxi (on demand car services) have also demonstrated viable business models that can be transposed across multiple geographic markets.

International visitors to Cuba reached 3 million in 2014 bringing in approximately US$2.6 billion in tourism revenue (source: CompassCayman.com). The majority of these travelers were Canadian, European and South/Central American. The travel and tourism industry in Cuba is somewhat restricted by the number of hotel beds available. The unique political and economic situation in Cuba has limited the growth potential for the tourism industry for many years.The Cuban government has controlled all aspects of the economy and capital has been limited thus inhibiting rapid expansion of the tourism industry. However, this is changing as Cuba and its government are starting to open up to a more capitalist economic system and are now allowing private businesses. There appears to be growing momentum for even more economic and democratic reforms which will open the growth potential of the Cuba tourism market further.

In December 2014, U.S. President Barack Obama announced that the U.S. would normalize diplomatic relations with Cuba. This will potentially inject billions of dollars into the Cuban economy and it included the relaxation of travel restrictions for qualified U.S. citizens going to Cuba. A general tourist travel ban for Americans remains in place but there are easing regulations in which qualified travelers to Cuba can simply qualify for one of 12 categories of travel permitted under a general license. With the relaxation of rules for qualified American travelers to Cuba, growth in travel to Cuba is on an upward trajectory. Already in 2015, American visits to Cuba were up over 50% and are expected to continue to grow to around 10 million people a year comprising a multi-billion dollar market assuming all travel restrictions are lifted (source: International Monetary Fund). It is important to note however that the 54 year old trade embargo imposed on Cuba by the U.S. prohibits most American companies from doing business with Cuba. This creates an opportunity in that a potentially multi-billion dollar market consisting of U.S. travelers going to Cuba will not be serviced by the bulk of U.S. travel companies. This significantly diminishes the U.S. competition until such a time the U.S. Congress votes to lift the trade embargo.

Since the U.S. government change in policy in late 2014 toward Cuba, Travelucion’s booking revenue are up over 150% in 2015. The target market going forward for the company is the United States in particular and North America in general, in addition to Europe and Central/South America. Travelers from Europe (Spain, Germany, UK, France) and Central/South America (Brazil, Venezuela) still represent the majority of bookings for Travelucion Media currently and the company will continue to service these markets. Canada is the largest market for tourism to Cuba at the moment and as such will be a market the company focuses on over the coming years in addition to the budding U.S. market. The relaxation of travel restrictions for qualified U.S. citizens going to Cuba and the potential end to the U.S. embargo will act as the ultimate catalysts for booming growth in the Cuban travel market and is expected to result in over 10 million travelers going to Cuba every year. Travelucion Media sees this as a significant opportunity to grow its business in North America catering to both Canadian and American travelers going to Cuba.

The company is uniquely positioned and able to offer custom vacations with rooms, car rentals, and specialty tours. There is a strong and growing demand for custom vacations where the customer selects where and when they want to go and what they want to do. The increase in U.S. based travel interest in Cuba is expected to increase hotel and flight costs, as well as rapidly deplete the available hotel rooms across the country.With many tourists looking to embrace the Cuban culture and hospitality, the company expects higher interest in private home rentals and B&B bookings, specialty tours, private restaurants, and self-drive car rental services as well as other car services such as the historic car tours offered in Havana. Additional tourism activities such as golf, fishing, water sports and spa services are all things that can be booked through Travelucion Media. The company also plans to establish relationships and partnerships with large North American travel and cruise line companies as the cruise industry opens up to Cuba.

Travelucion Media will continue to build on its 4,000 private home (Casa Particulares) rental listings database using a model similar to that of Airbnb and HomeAway. The company has recently signed an exclusive contract to market Cuban medical treatments across its websites generating over 30 million page views a year. With rising healthcare costs and wait times in developed countries, Cuba is perfectly situated to become a key destination for this as it has one of the best healthcare systems in the world. As per the contract, Travelucion Media will keep a 10% commission on all medical procedures and treatments booked through its websites. The company also offers ecotourism packages for travelers looking to see the natural side of Cuba. The company is focused on developing its business to cater to the traveler who wants the freedom to buy any type of customized experience.